Dear Mr. Hastings

Kelley is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Dear Mr. Hastings,

I am impressed with the way you have managed to convince everyone that Netflix (NASDAQ: NFLX) is a wilting flower. Last January I lamented the fact that Netflix shares were out of my price point. And, as is often the case, I convinced myself that I didn’t want what I couldn’t have. I loved reading articles that specified the ways in which the shares were greatly overpriced and how they would come crashing down. But this didn’t happen right away, and the stock price surged to the $300 range.

Well, here we are 11 months later, Netflix shares are but a shadow of their former selves, and I am a shareholder.  The rising cost of content is certainly an issue, but what I really have to acknowledge is the fact that there is no alternative. I don’t know what the subscribers that dropped you are going to do; my guess is that the majority will eventually sheepishly return for two reasons. First, there is no good alternative. Amazon's (NASDAQ: AMZN) selection is lacking and Coinstar's (NASDAQ: OUTR) Red Box means having to leave the house, having a limited selection, and late fees.  There are others who are trying to compete, but they are really still just a speck in your rear-view mirror. Second, the price of the service, despite recent hikes, is dirt cheap. I can pick a movie, stream it instantly, never have a late fee, never leave the couch, never have to wait. I hate to admit it (because you might take me up on this) but I would pay more for this service. I spend more on lattes in a month than I pay for the convenience of streaming movies in my home.

I can tell you I have been spoiled by the instant gratification that streaming allows. When I had the DVD service I often found that I was not in the mood to watch the movies I had selected a day or two prior. I love instant streaming and will continue to be a faithful subscriber. Revenues may be tight until your international expansion takes hold (and it will) but the reality is there is no decent alternative and I have been spoiled by instant streaming.


Kelley Ryan

P. S.  I got your email a while ago, and I would happily give Netflix as a gift, but everyone I know already has it.

Kelley Ryan owns shares of Netflix but none of the other stocks mentioned in this post. She has no plan to buy or sell stocks mentioned here in the next three market days.

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